As local tax bases shrink, a handful of states are leading the way in pushing the consolidation envelope.

With the pending merger of their respective fleet operations, San Benito County Public Works Administrator Steve Wittry (left) and City of Hollister, Calif., Public Works Director Clay Lee will provide for the other what each has specialized in — the county, heavy equipment; the city, passenger vehicles. The transition is also made easier because of proximity: both operations are located in Hollister, the county seat. Photos: Nick Lovejoy Photography

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Hollister, Calif., Equipment Mechanic Ernie Castillo's job will become more specialized after his city and the county merge services.

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Source: PUBLIC WORKS

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In California, San Benito County and the City of Hollister plan to merge fleet services because continuing statewide budgetary issues — like a deficit of around $13 billion — are trickling down to city and county agencies.

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The rich are getting richer and the poor, poorer. Consolidation ensures equal access to public services for citizens of all economic means, says local government consultant Mayraj Fahim.

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TWO BECOME ONE. Some say next year's merger of New Jersey's Princeton Borough and Princeton Township into “Princeton” works only because the two communities had similar populations and tax rates and that, because they'd shared 13 services, estimates of $3.2 million in annual savings are overoptimistic. But in a state with the most municipal bond downgradings, at least one financial analyst, Moody's Investors Service Inc., terms the move “credit positive.” The new Princeton will have about $112 million in combined debt, which is about 16% of the operating expenses of each. Map: Center for Governmental Research Inc.

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Alternatives: sharing services

If a complete merger isn't feasible or desired, there are other ways to maintain services for less taxpayer cost.

In California, San Benito County and the City of Hollister are taking steps to merge fire protection, sheriff/ police, and fleet maintenance services. “Both agencies are trying to minimize general fund expenditures as much as possible,” explains Steve Wittry, the county's public works administrator.

Fleet services came into consideration because county seat Hollister and San Benito County both have similar fleet maintenance facilities. But while the county's is set up primarily to service large trucks and equipment, the city's is set up for passenger vehicles. The consolidation will keep both facilities open by allowing each to specialize. With the county taking in large equipment and city employees working on passenger cars and emergency vehicles, vehicles can be serviced and placed back on the street more quickly.

Wittry also doesn't anticipate any reduction in staff.

But first thing's first. To consolidate services, Wittry says identifying and evaluating costs is key. “We need to analyze the age of the respective fleets, annual maintenance requirements, expected service turn-around, cost comparison to private firms, and then package the information for elected officials.” The evaluation will be completed in time for the county's fiscal year budget process to begin in June.

Another way to share services is through intergovernmental agreements (IGAs). In Oregon, the state DOT, Jackson County, and a handful of cities have been working together both informally and under IGA contracts for at least a decade.

“Different jurisdictions have different specialties. By combining our efforts, we've made all of our organizations more efficient,” says Tad Blanton, field operations supervisor with the City of Medford Public Works Department.

For example, Medford has its own paving crew with a full-size highway paver, the county doesn't but can provide chip-sealing, and the DOT performs deicing and has its own chemical storage facility. By working together, one entity can access all three services — and trained personnel — without having to hire a contractor or buy additional equipment.

“We don't have to invest in equipment we don't use all the time, and neither do they,” says Blanton.

Another benefit of IGAs is that, by providing regional services, Medford's Equipment Maintenance Division brings in revenue to help offset costs. And when paying for services from governmental agencies that aren't profit-oriented, the fee isn't as high as a contractor's.

Blanton adds that because there aren't a lot of contractors who do specialized municipal work in the area (i.e., preventive pavement maintenance), partnering with other agencies is beneficial for his city. “In our case, isolation breeds jurisdictional interdependence because we just don't have a lot of options,” he says.

THE CASE FOR CONSOLIDATION

Mayraj Fahim is a local government reorganization consultant based in Connecticut. She is also the local government adviser for The City Mayors Foundation, an international think tank dedicated to urban affairs. In her early career, she was a municipal finance specialist. Now she's a living encyclopedia on “intergovernmental cooperation” efforts, both past and present, here and abroad. She supports integration of local governments, citing France (the first country to integrate local governments due to fragmentation) and Canada's British Columbia and Ontario as best-practice examples.

Our system of towns, villages, and — in particular — special districts, Fahim says, economically and demographically segregates citizens. She fears that if left unchecked, the system could produce a developing-country profile in which the upcoming majority-minority class of citizens (born last year) won't be able to provide enough tax revenue to support government-funded public aid programs.

“Fragmented governance has meant poor education and poor job prospects,” Fahim explains. “To me, this is the greatest consequence of America's avoidance of integrated local governance. What's needed is more service integrations, interlocal cooperation for economic development, and small consolidations.”

Enlarging a service area produces a more economically diverse constituency, ensuring the most vulnerable residents don't experience the degradation in public services or educational institutions that they might in smaller jurisdictions with more limited revenues. Fahim also stresses the importance of local units working together not just to save money, but also to build their respective economies.

“When we look past the current financial challenges, we shouldn't lose sight of what lies on the horizon,” Fahim says. “Maybe the federal government needs to encourage this if the states do not.”

The federal government is already poised to set an example.

In January, President Barack Obama proposed consolidating the Commerce Department's core business-related functions with five smaller agencies: the Small Business Administration, the Office of the U.S. Trade Representative, the Export-Import Bank, the Overseas Private Investment Corp., and the Trade and Development Agency. The proposal, which aims to reduce duplicative programs and shrink federal bureaucracy, requires congressional approval.